News

On Friday, August 27, 2004, all participants in Pacific Gas and Electric Company's 2005 Gas Transmission and Storage rate case asked the California Public Utilities Commission to approve the joint settlement agreement reached this month. The Gas Accord III settlement, if approved, will affirm California Gas Transmission's unbundled market structure and set gas transmission and storage rates for 2005 through 2007.

Representatives from every conceivable segment of the northern California gas market joined the settlement, including consumer advocates, merchant electric generators, marketers, cogenerators, municipal electric generators, manufacturers, gas producers and independent storage providers.

If approved by the CPUC, the settlement will continue CGT's current Gas Accord structure of unbundled rates and services, originally implemented in March 1, 1998, easing potential contracting and marketing burdens for northern California market participants. All parties will benefit from increased market stability and certainty over the next three years.

Rates

The settlement will approve rates for CGT's backbone transmission and storage services from January 1, 2005, through December 31, 2007. All agreed upon rate changes will occur on a calendar year basis, commencing January 1 of the applicable year. Proposed Settlement Rates for transmission and storage are now available in the Pipe Ranger Library. If approved, the settlement will reduce the total cost of service used in gas transmission and storage rates on January 1, 2005, by 2% when compared to rates effective January 1, 2004. The settlement, its rates and related tariff changes are subject to CPUC approval.

Contracting for the Future

The continuing market structure includes the flexibility to address individual customer needs and negotiate contracts accordingly. With the settlement's additional rate and service certainty through 2007, customers may begin discussing their future contracting needs with CGT Sales Representatives as soon as their business needs require. The settlement allows customers to contract individually for future capacity on a first come first serve basis. Unlike prior years, CGT will not conduct a formal open season or contract extension process. Contracts for 2005 or multiyear service are available now, even prior to the approval of the settlement.

Small Revisions to Current Structure

The Gas Accord III settlement includes some revisions to current services and business rules.

New Backbone Level End-Use Service

As previously ordered by the CPUC and detailed in the settlement, Pacific Gas and Electric Company will implement a backbone level end-use rate beginning January 1, 2005. This rate is only available to PG&E end-use customers who meet all of the following eligibility criteria:

1. The load must be new or incremental to PG&E's system since March 1, 1998.
2. The load must never have physically connected to PG&E's local transmission or distribution system.
3. The lateral pipeline must be directly connected to PG&E's backbone transmission system and must be 100 percent owned or paid for in advance by the end-use customer. ¹

Storage Market Enhancements

The settlement proposes two refinements to enhance the competitiveness of storage markets. Mission to off-system as-available rates will be revised so that gas withdrawn from storage may be delivered to off-system destinations at zero cost. This standard rate of zero is currently only available for as-available Mission to on-system contracts. Additionally, firm Redwood and Baja contracts will include the option to convert a portion of contracted capacity to firm Mission path service at no cost.

Other Refinements

Other refinements requested in the Gas Accord III settlement include:

• PG&E will receive balancing account treatment for core local transmission revenues.
• Over two years, a direct assignment method of allocating operating and maintenance costs between backbone transmission, local transmission and storage will be rolled in. This revision, combined with significant Baja path capital investment, results in a lower cost of service and rates for local transmission service and a corresponding higher cost of service and rates for backbone services, primarily on the Baja path.
• Minor revisions to Core Transportation Agent (CTA) rules will be made. CTAs' option to accept a proportional share of firm interstate pipeline capacity held by PG&E's Core Procurement department will be expanded to include pipelines upstream of Gas Transmission Northwest (GTN). The core brokerage fee will also be increased from $0.024 to $0.030 per decatherm.
• The commensurate discount rule, which requires CGT to discount Baja path rates if it discounts the Redwood path on-system rate, will be eliminated once PG&E is no longer affiliated with GTN pipeline.

More Information Available

Complete details are available in the Gas Accord III Settlement Agreement itself, now located in the Settlements wing of Pipe Ranger's Library. Your CGT Representatives are also available to discuss the settlement and your future gas transmission and storage needs.